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Russo v. Pelican Partners International S. de R.L. de C.V.

United States District Court, D. Arizona

July 5, 2016

Michael Louis Russo, Plaintiff,
v.
Pelican Partners International S. de R.L. de C.V., et al., Defendants.

          ORDER

          James A. Teilborg Senior United States District Judge

         Pending before the Court is Plaintiff Michael Russo’s motion for default judgment against Defendants Pelican Partners International S. de R.L. de C.V. (“Pelican International”), and Pelican Partners International, LLC (“Pelican Partners”), pursuant to Fed.R.Civ.P. 55(b). (Doc. 11). No response has been filed by Defendants. The Court will grant the motion.

         I. Background

         This action commenced on October 6, 2015, when Plaintiff’s Complaint was filed. (Doc. 1). The Defendants named in this action failed to answer the Complaint or file any motion to dismiss in accordance with Federal and Local Rules. On November 25, 2015, upon application, the Clerk of the Court entered default against Pelican International and Pelican Partners pursuant to Rule 55(a). (Doc. 10). Plaintiff thereafter filed the pending motion for default judgment. (Doc. 11).

         On February 25, 2016, this Court Ordered Plaintiff to show cause why Defendants Jonathan Beck and Alessandra Beck should not be dismissed from the action for failure to serve in accordance with Fed.R.Civ.P. 4(m). (Doc. 14). Following the March 1 hearing, the Becks were dismissed.[1] (Doc. 15). Plaintiff subsequently filed a Motion for Entry of Judgment pursuant to Fed.R.Civ.P. 54(b), [2] (Doc. 16), and renewed his motion for default judgment. (Doc. 17 at 2). Since the default was entered on November 25, 2015, neither Pelican International nor Pelican Partners have responded in any capacity.

         Upon entry of default, the factual allegations of the Complaint, except those relating to the amount of damages, are taken as true. Yoo v. Arnold, 615 Fed.Appx. 868, 870 (9th Cir. 2015); Fair Housing of Marin. v. Combs, 285 F.3d 899, 906 (9th Cir. 2002); Televideo Systems, Inc. v. Heidenthal, 826 F.2d 915, 917 (9th Cir. 1987). The Court thus accepts as true the well-pleaded facts contained in the Complaint. (Doc. 1).

         II. Default Judgment

         Fed. R. Civ. P. 55(a) establishes that “[w]hen a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend as provided by these rules . . . the clerk shall enter the party’s default.” Once a default has been entered, and a defendant fails to appear to move to set aside the default, then the Court may enter a default judgment pursuant to Fed.R.Civ.P. 55(b)(2). The “general rule” with respect to default judgments is that they “are ordinarily disfavored, ” as “[c]ases should be decided upon their merits whenever reasonably possible.” Eitel v. McCool, 782 F.2d 1470, 1472 (9th Cir. 1986) (citing Pena v. Sequros La Comercial, S.A., 770 F.2d 811, 814 (9th Cir. 1985)). Nonetheless, “[g]ranting default judgment is within the court’s discretion.” EEOC v. Recession Proof United States LLC, No. 11-CV-01355-PHX-BSB, 2013 U.S. Dist. LEXIS 171524, at *8 (D. Ariz. Aug. 19, 2013).

         Plaintiff moves the Court to exercise its discretion and enter default judgment against Defendants Pelican International and Pelican Partners for each of the Complaint’s claims. In determining whether default judgment is appropriate, the Court is guided by consideration of the following factors: “(1) the possibility of prejudice to the plaintiff, (2) the merits of plaintiff’s substantive claim, (3) the sufficiency of the complaint, (4) the sum of money at stake in the action; (5) the possibility of a dispute concerning material facts; (6) whether the default was due to excusable neglect, and (7) the strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits.” Eitel, 782 F.2d at 1471-72 (citation omitted). The Court will address each of the applicable factors in turn.

         A. Possible Prejudice to Plaintiff

         The first Eitel factor weighs in favor of granting Plaintiff’s motion, as Plaintiff will be prejudiced if default judgment is not entered in its favor. As noted supra, at no point have Defendants responded to this action, and the record reflects that Plaintiff gave proper notice. (Docs. 6, 7). If the motion for default judgment is not granted, Plaintiff “will likely be without other recourse for recovery.” PepsiCo, Inc. v. Cal. Sec. Cans., 238 F.Supp.2d 1172, 1177 (C.D. Cal. 2002); see also United States v. $86, 496.00 in United States Currency, No. CV-07-1693-PHX-DGC, 2008 U.S. Dist. LEXIS 115052, at *4-5 (D. Ariz. July 1, 2008) (citation omitted).

         B. Merits of Plaintiff’s Claims

         Where, as here, a default has been entered, the factual allegations of the Complaint are taken as true. However, for this factor to weigh in favor of granting a motion for default judgment, a plaintiff must plead sufficient facts to “state a claim on which it may recover, which often requires establishing a prima facie case.” Getty Images (US), Inc. v. Virtual Clinics, No. C13-0626JLR, 2014 U.S. Dist. LEXIS 12449, at *8-9 (W.D. Wash. Jan. 31, 2014) (citing Danning v. Lavine, 572 F.2d 1386, 1388 (9th Cir. 1978)); see also Cripps v. Life Ins. Co. of N. Am., 980 F.2d 1261, 1267 (9th Cir. 1992). Thus, the Court must analyze each of Plaintiff’s four distinct claims against Defendants: (1) breach of contract; (2) breach of the covenant of good faith and fair dealing; (3) negligent misrepresentation by omission; and (4) negligence per se.[3]

         1. Breach of Contract

         The Complaint first alleges that Defendants breached a written contract between themselves and Plaintiff. The Court notes at the outset that Plaintiff failed to attach to the Complaint any of the documents relied upon in support of his claim, which is perplexing.[4] Nonetheless, upon entry of default, the factual allegations of the Complaint, excepting damages, are taken as true. Yoo, 615 Fed.Appx. at 870. Having reviewed the Complaint, the Court finds that Plaintiff has made out a prima facie claim.

         A breach of contract clam requires proof of the existence of a contract, breach, and resulting damages. Thomas v. Montelucia Villas, LLC, 302 P.3d 617, 621 (Ariz. 2013). Here, the Complaint alleges that on September 29, 2002, Plaintiff “executed a purchase and sale agreement” with Defendants “to purchase a condominium unit at Bella Sirena” in Mexico. (Doc. 1 at 3). The facts further allege that on May 8, 2004, the parties executed a “Promise of Trust” which obligated Defendants to transfer ownership of the property and title to the unit through an “irrevocable transfer of ownership trust, known as a fideicomiso in Mexico.” (Id. at 4). During the intervening months, Plaintiff tendered a down payment on the unit, and made several installment payments, totaling $233, 910 towards the purchase of the condominium, completing Plaintiff’s obligations under the agreement. The Promise of Trust further committed Defendants “to warrant and defend [Plaintiff’s] clear title to the unit.” Defendants have failed to deliver clean title to Plaintiff, and have failed to defend Plaintiff’s title. A construction dispute arose in 2006-which Plaintiff was never made aware of-and in 2014, Plaintiff learned from the condominium’s Homeowners Association that the resolution of the “construction dispute” resulted in a judgment that stripped Plaintiff of ownership of the property. (Id. at 5-6). At no point was Plaintiff given title to the property, at no point did Defendants inform Plaintiff of legal proceeding that could affect his status as owner, and at no point did Defendants endeavor to defend Plaintiff’s title.

         Based on the preceding facts, taken as true, Plaintiff has made out a prima facie case that he entered into a written agreement with Defendants, carried out his contractual obligations, and that Defendants failed to carry out their own obligations when they failed to deliver title to the unit to Plaintiff. It follows that Defendants have breached, and Plaintiff has suffered $233, 910 in damages, the amount tendered to Defendants for delivery of clean title to the at-issue property.

         2. Breach of the Covenant of Good Faith and Fair Dealing

         Arizona recognizes the covenant of good faith and fair dealing, an implied covenant present in all contracts, as a matter of law. See United Dairymen of Ariz v. Shugg, 128 P.3d 756, 760 (Ariz.Ct.App. 2006) (recognizing that “[a]ll contracts as a matter of law include the implied duties of good faith and fair dealing, and contract damages are available for their breach”). “A party can breach the implied covenant of good faith and fair dealing without breaching an express provision of the underlying contract.” Id. (citing Beaudry v. Ins. Co. of the West, 50 P.3d 836, 841 (Ariz.Ct.App. 2002)). Breach of this implied covenant may occur where a party acts “in ways not expressly included in the contract but which nonetheless bear adversely on the other party’s reasonably expected benefits of the bargain.” Id. (citing Bike Fashion Corp. v. Kramer, 46 P.3d 431, 435 (Ariz.Ct.App. 2002)). Stated another way, “[t]he implied covenant of good faith and fair dealing prohibits a party from doing anything to prevent the other contracting parties from receiving the benefits of the agreement.” Enyart v. Transamerica Ins. Co., 985 P.2d 556, 561 (Ariz.Ct.App. 1998).

         Plaintiff’s Complaint alleged two instances of Defendants’ behavior that constitute breach the implied covenant of good faith and fair dealing: (1) Defendants failed to timely deliver clean title of the condominium property to Plaintiff; and (2) Defendants failed to “mount a defense in litigation in Mexico against [Plaintiff’s] equitable title to the subject property.” (Doc. 1 at 8). Plaintiff has also asserted that these identical failures by Defendants constitute breach of contract’s express terms. (Id.). Although a party need not violate the express terms of a contract to breach the implied covenant of good faith and fair dealing, ” Wells Fargo Bank v. Ariz. Laborers, Teamsters & Cement Masons Local No. 395 Pension Trust Fund, 38 P.3d 12, 29 (Ariz. 2002) (citation omitted), these actions are plainly consistent with acting in a way to prevent the other party from “receiving the benefits of the agreement.” Enyart, 985 P.2d at 561. The Complaint alleges that Defendants accepted payment of $233, 910.00 from Plaintiff over a period of two years, frequently reassured Plaintiff that they were endeavoring to fulfill their contractual obligations, failed to deliver clean title to the property, failed to ever notify Plaintiff of any ongoing litigation in Mexico concerning the property, and failed to mount a good faith defense on Plaintiff’s behalf. Plaintiff has pleaded a prima facie claim that Defendants breached the implied covenant of good faith and fair dealing.

         Plaintiff has presented no evidence to indicate that the contract between himself and Defendants allowed for the recovery of liquidated damages. Accordingly, ordinary contract damages are the “proper measure of damages for this breach.” U ...


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